The trading action over the past two days has looked like two giant bumps in the road. A steady climb up, some rounded tops for a few hours, then a persistent decline towards a marginal close. Many market watchers were thrilled to witness an intraday passing of the record high on the S&P and while the last two days have been disappointing, the bulls and financial media are doing their best to assure you that it’s no big deal. Bob Pisani of CNBC has repeatedly issued his personal assurances that a new S&P record is a certainty over the next few days. I am not quite sure of anything about the markets lately so I am impressed by the bulls and their conviction.

One part of the constant bullish “buzz and hum” is that skepticism is over the top. I have written about this phenomenon before, so I’ll just sum it up - bulls love to tell you about skepticism but I hear much more from them about it than I do from actual skeptics. Yes, short interest is at record highs and I wish that was not the case. I’d like to compare it to some prior instance but the number of hedge funds and the capital they are employing on the short side is much larger now than any other period so I just don’t know how to judge short interest. Market sentiment indicators are interesting, but their predictive ability is not very good. Like the VIX, many of these measures of supposed fear, greed, complacency, anxiety, etc. etc. seem to either be stuck in a rut for long periods or fluctuate so dramatically that they predict everything and nothing at the same time.

Last week, my signal work was consistent with an upward move in the market for the first time in a while. Lately, it seems like my picture of the market is upside down and opposite to the index. This week I gave 291 new UP signals vs. 91 new DOWNs. However, most of the stocks I expect to head higher were represented by Mid and Small caps with only 17 Large Caps. To say the least, I was not impressed with the leadership.

Time will tell whether the last few days are just minor bumps in the road or the kind that give you a flat tire. On the backs of the new UPs this week, the HEDGEfolios Timing Indicator had an improvement in the bullish reading but as a whole, I am still firmly in the bearish camp. Gas prices and interest rates are on the rise and yet, the market is still humming along. That’s very impressive, but most impressive things in the market are abnormalities that eventually revert to the mean or historical norms.